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September 2007 Non-Manufacturing ISM Report On Business®

FOR RELEASE: October 3, 2007


Contact: Andrea Waas, APR
ISM, Vice President
Tempe, Arizona
800/888-6276, Ext. 3009
E-mail: awaas@ism.ws

Business Activity at 54.8%

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire United States, while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of September 2007.

New Orders Index at 53.4%
Employment Index at 52.7%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a slower rate in September than in August, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee; and senior vice president — supply management for Hilton Hotels Corporation. "Non-manufacturing business activity increased for the 54th consecutive month in September," Nieves said. He added, "The Business Activity Index decreased one percentage point to 54.8 percent for the month of September. New orders increased at a slower rate with the index registering 53.4 percent. The Employment Index increased to 52.7 percent in September. The Prices Index increased to 66.1 percent in September. Eight non-manufacturing industries reported increased activity in September. Members' comments in September remain mixed about business conditions. The overall indication in September is continued economic growth in the non-manufacturing sector but at a slower pace than in August."

TOP PERFORMING INDUSTRIES

The eight industries reporting growth in September — listed in order — are: Health Care & Social Assistance; Retail Trade; Utilities; Transportation & Warehousing; Other Services*; Public Administration; Wholesale Trade; and Finance & Insurance. The five industries reporting decreased activity from August to September are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Management of Companies & Support Services; Information; and Professional, Scientific & Technical Services.

WHAT RESPONDENTS ARE SAYING ...
  • "Business activity is flat due to budget concerns by customers globally. New business is limited globally and very price competitive." (Professional, Scientific & Technical Services)
  • "August was a good month. September is holding its own." (Wholesale Trade)
  • "Economic conditions suggest continued caution." (Educational Services)
  • "Appears that we have reached equilibrium. Supply, demand, deliveries, and prices are much more predictable." (Mining)
  • "The market is getting soft with the slow down in the housing market and will continue in the fourth quarter." (Construction)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
SEPTEMBER 2007
  Non-Manufacturing Manufacturing
Index Series
Index
Sept.
Series
Index
August
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Sept.
Series
Index
August
Percent
Point
Change
Business Activity / Production 54.8 55.8 -1.0 Growing Slower 54 54.6 56.1 -1.5
New Orders 53.4 57.0 -3.6 Growing Slower 54 53.4 55.3 -1.9
Employment 52.7 47.9 +4.8 Growing From Contracting 1 51.7 51.3 +0.4
Supplier Deliveries 50.5 50.5 0.0 Slowing Same 4 51.9 50.0 +1.9
Inventories 50.0 57.0 -7.0 Unchanged From Growing 1 41.6 45.4 -3.8
Prices 66.1 58.6 +7.5 Increasing Faster 52 59.0 63.0 -4.0
Backlog of Orders 47.0 50.0 -3.0 Contracting From Unchanged 1 51.0 50.5 +0.5
New Export Orders 50.0 53.5 -3.5 Unchanged From Growing 1 54.5 57.0 -2.5
Imports 51.0 55.0 -4.0 Growing Slower 6 53.0 52.5 +0.5
Inventory Sentiment 62.0 61.5 +0.5 "Too High" Faster 124 N/A N/A N/A
Customers' Inventories N/A N/A N/A       50.0 49.0 +1.0

* Non-Manufacturing ISM Report On Business® data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. Manufacturing ISM Report On Business® data is seasonally adjusted for New Orders, Production, Employment, Supplier Deliveries and Inventories.

** Number of months moving in current direction.


COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY

Commodities Up in Price

Airfare (3); Computers and Accessories; Computer Servers; Corrugated Boxes; Envelopes; Fuel (8); Gasoline*; Hotel Costs (16); Paper (3); Paper Products; Personal Computers; Polyethylene; Printer Toner; Professional Services; Programmers; Pumps; Raw Materials; and Stainless Steel Products.

Commodities Down in Price

Gasoline* (4) and Unleaded Gasoline.

Commodities in Short Supply

Construction Contractors is the only commodity listed in short supply.

*Reported both Up and Down in price.

Note: The number of consecutive months the commodity is listed is indicated after each item.



SEPTEMBER 2007 NON-MANUFACTURING INDEX SUMMARIES



Business Activity

ISM's Non-Manufacturing Business Activity Index in September registered 54.8 percent, indicating a slower rate of growth in business activity compared to August. The implication is that non-manufacturing business activity is continuing to increase for the 54th consecutive month. Eight industries reported increased business activity, and five industries reported decreased activity for the month of September.

The industries reporting growth of business activity in September are: Health Care & Social Assistance; Retail Trade; Utilities; Transportation & Warehousing; Other Services*; Public Administration; Wholesale Trade; and Finance & Insurance. The five industries reporting decreased activity from August to September are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Management of Companies & Support Services; Information; and Professional, Scientific & Technical Services.


Business Activity
%
Higher
%
Same
%
Lower

Index
September 2007 25 56 19 54.8
August 2007 27 54 19 55.8
July 2007 30 52 18 55.8
June 2007 40 49 11 60.7


THE LAST 12 MONTHS
THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Sept 2007 54.8   Mar 2007 52.4
Aug 2007 55.8   Feb 2007 54.3
Jul 2007 55.8   Jan 2007 59.0
Jun 2007 60.7   Dec 2006 56.7
May 2007 59.7   Nov 2006 58.3
Apr 2007 56.0   Oct 2006 57.4
Average for 12 months — 56.7
High — 60.7
Low — 52.4

New Orders

ISM's Non-Manufacturing New Orders Index decreased to 53.4 percent in September from the 57 percent registered in August. This indicates continued expansion of new orders but at a slower rate than in August. Comments from members include: "Customers being more conservative; competitive activity" and "Acquired new projects."

Industries reporting growth of new orders in September are: Health Care & Social Assistance; Retail Trade; Utilities; Transportation & Warehousing; Other Services*; Construction; Educational Services; and Wholesale Trade. The industries reporting contraction of new orders in September are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Management of Companies & Support Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; and Finance & Insurance.


New Orders
%
Higher
%
Same
%
Lower

Index
September 2007 22 59 19 53.4
August 2007 27 57 16 57.0
July 2007 25 57 18 52.8
June 2007 34 52 14 56.9

Employment

Employment activity in the non-manufacturing sector increased in September after one month of contraction. ISM's Non-Manufacturing Employment Index for September is 52.7 percent, a 4.8 percentage point increase from the 47.9 percent reported in August. Six industries reported increased employment, nine reported a decrease, and three indicated employment is unchanged from August. Comments from respondents include: "Slight increase due to activity levels"; "In preparation of new projects starting"; and "We continue to grow at a double-digit pace — hiring is up to meet that growth."

The industries reporting growth in employment in September are: Transportation & Warehousing; Retail Trade; Professional, Scientific & Technical Services; Educational Services; Finance & Insurance; and Health Care & Social Assistance. The nine industries reporting a reduction in employment in September are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Other Services*; Accommodation & Food Services; Utilities; Management of Companies & Support Services; Wholesale Trade; Public Administration; and Information.


Employment
%
Higher
%
Same
%
Lower

Index
September 2007 18 66 16 52.7
August 2007 12 70 18 47.9
July 2007 21 66 13 51.7
June 2007 24 67 9 55.0

Supplier Deliveries

In September, the rate of slowing of supplier deliveries remained the same when compared to August. The index registered 50.5 percent for both September and August. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in September are: Arts, Entertainment & Recreation; Information; Educational Services; Health Care & Social Assistance; Finance & Insurance; and Management of Companies & Support Services. The industries reporting faster supplier deliveries in September are: Transportation & Warehousing; Wholesale Trade; and Public Administration.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
September 2007 7 87 6 50.5
August 2007 7 87 6 50.5
July 2007 8 87 5 51.5
June 2007 8 85 7 50.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 50 percent in September, indicating that inventory levels remained the same as in August. Of the total respondents in September, 30 percent indicated they do not have inventories or do not measure them. Comments from members include: "Backing off of increasing inventory due to lower level of new orders"; "Adjusting to the business level"; and "Focused effort to reduce."

The industries reporting increases in inventories in September are: Other Services*; Retail Trade; Educational Services; Management of Companies & Support Services; Finance & Insurance; and Information. The industries reporting decreases in inventories in September are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Arts, Entertainment & Recreation; Transportation & Warehousing; Professional, Scientific & Technical Services; Utilities; Wholesale Trade; and Real Estate, Rental & Leasing.


Inventories
%
Higher
%
Same
%
Lower

Index
September 2007 18 64 18 50.0
August 2007 26 62 12 57.0
July 2007 28 54 18 55.0
June 2007 21 63 16 52.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in September for the 52nd consecutive month. ISM's Non-Manufacturing Prices Index for September is 66.1 percent, 7.5 percentage points higher than August's index of 58.6 percent. In September, the percentage of respondents reporting higher prices increased by 7 percentage points to 30 percent as compared to August. The percentage indicating no change remained the same at 68 percent. The percentage of respondents noting lower prices decreased by 7 percentage points in September.

The industries reporting an increase in prices paid in September are: Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Management of Companies & Support Services; Educational Services; Accommodation & Food Services; Information; Finance & Insurance; Retail Trade; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Transportation & Warehousing; Other Services*; and Public Administration. The one industry reporting a decrease in prices in September is Professional, Scientific & Technical Services.


Prices
%
Higher
%
Same
%
Lower

Index
September 2007 30 68 2 66.1
August 2007 23 68 9 58.6
July 2007 29 68 3 61.3
June 2007 35 62 3 65.5

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in September, registering 47 percent, 3 percentage points lower than the 50 percent reported in August. Of the total respondents in September, 41 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in September are: Information; Educational Services; Construction; and Retail Trade. The industries reporting lower backlog of orders in September are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Other Services*; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Utilities; Health Care & Social Assistance; Wholesale Trade; Public Administration; and Transportation & Warehousing.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
September 2007 13 68 19 47.0
August 2007 13 74 13 50.0
July 2007 14 78 8 53.0
June 2007 14 65 21 46.5

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically based personnel in September remained unchanged for the month of September. The New Export Orders Index for September is 50 percent, compared to August's index of 53.5 percent. Of the total respondents in September, 68 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The industries reporting an increase in new export orders in September are: Information; Accommodation & Food Services; Wholesale Trade; and Retail Trade. The four industries reporting a decrease in export orders are: Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Management of Companies & Support Services; and Other Services*.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
September 2007 17 66 17 50.0
August 2007 19 69 12 53.5
July 2007 22 61 17 52.5
June 2007 26 66 8 59.0

Imports

In September, the ISM Non-Manufacturing Imports Index registered 51 percent, 4 percentage points lower than August's index of 55 percent, indicating that use of imports increased at a slower rate in September when compared to August. In September, 61 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The industries reporting an increase in the use of imports in September are: Information; Accommodation & Food Services; and Retail Trade. The one industry reporting a decrease in imports for the month of September is Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
September 2007 12 78 10 51.0
August 2007 16 78 6 55.0
July 2007 19 71 10 54.5
June 2007 24 67 9 57.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in September registered 62 percent, 0.5 percentage point higher than the 61.5 percent reported in August. This indicates that more non-manufacturing purchasing and supply executives feel discomfort with current levels of inventory in September than in August. In September, 27 percent of respondents felt their inventories were too high, 3 percent indicated their inventories were too low, and 70 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in September are: Wholesale Trade; Other Services*; Management of Companies & Support Services; Professional, Scientific & Technical Services; Construction; Information; Finance & Insurance; Public Administration; and Retail Trade. The one industry reporting that their inventories are too low is Transportation & Warehousing.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
September 2007 27 70 3 62.0
August 2007 27 69 4 61.5
July 2007 35 60 5 65.0
June 2007 23 75 2 60.5

*Other Services include:
Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services.

About this Report

The data presented herein is obtained from a survey of non-manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

The Non-Manufacturing ISM Report On Business® is based on data compiled from purchasing and supply executives nationwide. Membership of the Non-Manufacturing Business Survey Committee is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). The Non-Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Other Services*; and Public Administration.

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment and Supplier Deliveries), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher and slower for Supplier Deliveries) and the negative economic direction (lower and faster for Supplier Deliveries). Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. The remaining indexes have not indicated significant seasonality.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the non-manufacturing economy in that index is generally expanding; below 50 percent indicates that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

The Non-Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™, the largest supply management research and education organization in the United States. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education.

The full text version of the Non-Manufacturing ISM Report On Business® is posted on ISM's Web site at www.ism.ws on the third business day of every month after 10:10 a.m. (ET).

The next Non-Manufacturing ISM Report On Business® featuring the October 2007 data will be released at 10:00 a.m. (ET) on Monday, November 5, 2007.


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